Concept_DC_Washington Monument

Maya MacGuineas: Tough budget choices for Congress, the president

Jun 8, 2017

Maya MacGuineas is president of the nonpartisan Committee for a Responsible Federal Budget and head of the Campaign to Fix the Debt. She recently wrote an opinion piece for The Hill newspaper. It is reposted here. 

Given that Republicans control the House, Senate and White House, Congress will have to pass a budget this year. Getting the budget done without punting, delaying or circumventing the requirements to lay out a fiscal roadmap will be necessary to show they can lead effectively. But that doesn’t mean it will be easy.

Because they are of the same party, President Trump’s budget is the natural symbolic starting point for Congress. But it can’t be the ending point, both because it doesn’t align with traditional GOP priorities and because the numbers don’t add up.

Still, Congress should start where the President did, with adopting a fiscal goal. The president’s budget aims to reach balance within 10 years - something Congressional budgets have done, at least on paper, since 2015. 

If anything, this goal may be too aggressive—admittedly, a surprising view for a deficit hawk. It is far more important, however, that the budget set a meaningful and realistic fiscal goal accompanied by serious policies likely to get enacted than for it to set a lofty goal with no real intention of follow up.

The first major test of seriousness for the Congressional budget will be whether it includes reconciliation instructions. Recent budget resolutions have assumed trillions of dollars in spending cuts on which Congress never acted. In fact, Congress has enacted legislation increasing the deficit. Reconciliation instructions are necessary to turn promises of deficit reduction into legislative reality by requiring Committees to produce legislation achieving the savings called for in the budget.

The second step is to rely on credible assumptions. In their budget, the administration assumes sustained 3 percent growth by the second half of the decade, which well exceeds what nearly all serious economists think is plausible. The over-reliance on economic growth – an important objective that we should pursue through things like tax reform, regulatory reform, increased investment and debt reduction – came from an unwillingness to put forth enough actual policies to get to their desired balance. Instead, Congress should stick with the Congressional Budget Office’s growth assumptions and close our deficit gap with specific spending policies.

And while we’re on reality, the administration’s handling of tax reform in the budget falls somewhere between nonexistent and duplicitous. Bizarrely, the budget plan does not include tax reform, despite the fact this is perhaps the president’s top priority for the year.  Yet the OMB Director claimed the growth stemming from tax reform would be used to help balance the budget. And at the same time, the secretary of the Treasury said it would be used to offset the cost of tax cuts.  Huh? The growth from a missing plan will be used to pay for two different things?  Details, please.

Congress should follow the lead of OMB and develop a plan that offsets the cost of any tax cut and uses the increased revenue from growth spurred by tax reform to help close the fiscal gap. This approach is win-win because not only does it help achieve any fiscal goal, but also because tax reform that is paid for helps grow the economy more than reform that is not.

Finally, there is entitlement reform. The president’s budget proposed some reforms of entitlement programs that should be considered, including reductions in agriculture subsidies, changes in federal retirement and reforms of disability and welfare programs.

But it fails to address the key drivers of debt, the big issues of Medicare and Social Security.

Medicare can be tackled through the budget. The program represents 16 percent of total spending and 22 percent of projected spending growth over the next decade. There are numerous options to reduce Medicare spending without harming beneficiaries through reforms to deliver care more efficiently, reducing excess payments and eliminating unnecessary subsidies.

Social Security is not part of the budget process, but it also cannot be ignored. Congress could call for a commission or working group to deal with Social Security's impending insolvency, as was done in the 1980’s. 

The president has pledged not to make changes to Social Security, but he is just plain wrong to do so. Doing nothing will result in across-the-board benefit cuts of more than 20 percent, harming all participants who depend on the program. And delaying action until the 11th hour leaves lawmakers with less and more severe choices to save the program.

The only reason to wait is political convenience. For Republicans who have been (wrongly) pledging not to raise taxes but (rightly) promising to address Social Security’s shortfall, now is the moment. 

None of this is easy. But a budget that provides for smart, thoughtful entitlement reforms, responsible tax reform that reduces the deficit through growth and enforcement provisions to achieve these goals would be a welcome step in restoring some fiscal sanity.

"My Views" are works published by members of the Committee for a Responsible Federal Budget, but they do not necessarily reflect the views of all members of the Committee.